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Ms . Firewater asked two questions immediately: First, what should she assume about investment and growth? Mr . Breezeway suggested two valuations: one assuming more
Ms Firewater asked two questions immediately: First, what should she assume about investment and growth? Mr Breezeway suggested two valuations: one assuming more rapid expansion as in the top panel of i Table and another just projecting past growth as in the bottom panel Second, what rate of return should she use? Mr Breezeway said that Prairie Home's usual return on book equity, sounded right to him, but he referred her to an article in The Journal of Finance indicating that investors in rural supermarket chains, with risks similar to Prairie Home Stores, expected to earn about on average. But if Prairie Home did go public, what should its shares sell for? Mr Breezeway worried that shares would be sold, either by Breezeway family members or by the company itself, at too low a price. One relative was about to accept a private offer for $ the current book value per share, but Mr Breezeway had intervened and convinced the wouldbe seller to wait.
Ms Firewater asked two questions immediately: First, what should she assume about investment and growth? Mr
Breezeway suggested two valuations: one assuming more rapid expansion as in the top panel of i Table and another just projecting past growth as in the bottom panel
Second, what rate of return should she use? Mr Breezeway said that Prairie Home's usual return on book equity, sounded right to him, but he referred her to an article in The Journal of Finance indicating that investors in rural supermarket chains, with risks similar to Prairie Home Stores, expected to earn about on average.
But if Prairie Home did go public, what should its shares sell for? Mr Breezeway worried that shares would be sold, either by Breezeway family members or by the company itself, at too low a price. One relative was about to accept a private offer for $ the current book value per share, but Mr Breezeway had intervened and convinced the wouldbe seller to wait.
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